Flight Training Expenses - Cases and Rulings

Flight Training Expenses - Cases and Rulings

Behm v. Commissioner of Internal Revenue, T.C. Memo 1987-157

Behm was an air traffic controller at Chicago's O'Hare Airport. When she was hired by the FAA, Behm held a commercial pilot certificate and an instrument rating. In 1982, she rented aircraft until her purchase of a Cessna 172 later that year. On her 1982 tax return Behm deducted $4,332 as educational expenses for the costs of rental aircraft, as well as the costs of maintenance, depreciation and operating her Cessna. The IRS disallowed the deductions.

The Tax Court acknowledged a sufficient nexus between the skills involved in flying and Behm's employment as an air traffic controller to justify a deduction if all other requirements under the tax code were met. The court, however, found that some of Behm's expenses were unreasonable, specifically the acquisition of the Cessna. The court stated that Behm was "interested in flying and an accomplished pilot before she became an air traffic controller. She purchased the airplane only after she had the job security which enabled her to support such an expense. We are satisfied...that the purchase of an aircraft by petitioner [Behm] was a personal expense." The court disallowed all Behm's deductions related to her Cessna but allowed those expenses unrelated to her personal aircraft.

Korsman v. Commission of the Internal Revenue, T.C. Memo 1986-270

Korsman was a pilot for Delta Airlines, flying out of Logan International Airport in Boston, Massachusetts. In 1974, he purchased a Cessna 185II Skywagon. From 1979-1981, Korsman flew the plane locally, landing at small airports near his home base. He also made several cross-country trips with his son, stopping at various airports along the way. On his 1979-1981 tax returns, Korsman deducted the costs associated with operating and maintaining the Cessna, including depreciation on the aircraft. The IRS disallowed the deductions, and Korsman petitioned the Tax Court to review his case.

Before the Tax Court, Korsman argued that he purchased the airplane to familiarize himself with airports currently served by Delta and airports to which Delta might expand its service. The court rejected this argument and found Korsman had no reasonable expectation that he would be called upon to fly to the cities he visited in his Cessna. Since the expenses were not directly and proximately related to his employment, they were not deductible.

The court further stated: "Happily for petitioner [Korsman], his avocation and his vocation merge to some degree. Such a merger of hobby and occupation can create difficulty in separating personal nondeductible expenses incurred in an activity from those that are deductible. In this case petitioner has not borne the burden placed upon him to prove his entitlement to any deduction."

Finally, the court noted that this case was distinguishable from the situation in which a pilot is unable to maintain his flying skills during the course of his employment and, therefore, properly deducts as educational expenses the costs of maintaining or improving flying skills necessary to his job. In this case, the record demonstrated Korsman flew approximately 75 hours per month for Delta during the taxable years.

Rossum v. Commissioner, T.C. Memo 1985-593

Rossum was hired by Pan American World Airlines as a pilot but assigned the duties of a flight engineer. Before joining Pan Am, Rossum held a commercial pilot's license with an instrument rating. In 1978, due to his seniority, Rossum became eligible for a co-pilot's position. He was not required to apply for the position, but if he did and failed to qualify, Pan Am would terminate his employment. Fearing his piloting skills had become rusty, Rossum bought an airplane and used the plane to improve his skills. In 1979, he qualified for the co-pilot's position. On his 1978 tax return, Rossum deducted as educational expenses the depreciation, maintenance, and fuel for his aircraft. The IRS disallowed the deduction.

According to the Tax Court, the issue in the case was whether the expenses were incurred by Rossum in order to qualify for a new trade or business, or to improve his present employment skills. To decide this issue, the court found it necessary to determine what Rossum's actual trade was before he purchased the plane as distinguished from what he might have been doing with previously acquired skills. The court found that although Rossum had been hired as a pilot, he was performing the duties of a flight engineer, a trade different from that of a pilot. The court held that Rossum used his aircraft to qualify himself for the position of co-pilot, a new trade or business, and, therefore, the expenses associated with the aircraft were not deductible.

Sartor v. Commissioner of Internal Revenue, T.C. Memo 1984-274

Sartor sold packaging materials in a multi-state sales territory. He flew his Cessna T-206 to meet with clients in their home states and deducted the aircraft costs on his tax returns. In 1980, Sartor began instrument training, which he completed in February 1981. On his 1980 tax return Sartor deducted the costs of the instrument training, as well as the other airplane expenses associated with his sales business. The IRS disallowed the deductions and Sartor petitioned the Tax Court to review his case.

The court ruled that the travel expenses were helpful to Sartor in his business as a salesman, since his sales territory was large and his customers were located several hours from major airports. Thus, the court held that Sartor's travel expenses were necessary within the meaning of the tax code. The IRS conceded that if the Tax Court found the airplane operating expenses necessary and reasonable business expenses, then the expenses for instrument training were likewise deductible.

Lee v. Commissioner of Internal Revenue, 723 F.2d 1424 (1984)

Lee flew DC 9 and Convair 880 aircraft for Delta Airlines. On his 1972 and 1973 tax returns, Lee deducted as educational expenses the costs associated with helicopter flight training. The IRS disallowed the deduction and Lee unsuccessfully appealed the ruling to the Tax Court.

The Ninth Circuit Court of Appeals affirmed the Tax Court and held that the helicopter training was not related to Lee's employment as a pilot for Delta. The appeals court noted that neither the FAA nor Delta required helicopter training and that Lee wanted to qualify himself to fly a helicopter commercially, not to improve his skills in his present position.

Raines v. Commissioner of Internal Revenue, T.C. Memo 1983-125

Raines was employed as a corporate pilot flying a KA-200 Beechcraft Turboprop. In 1978, Raines attended a fan-jet Falcon DA-20 type-rating course conducted by Flight Safety International. At the conclusion of the course, Raines was tested and received a Falcon DA-20 type rating. Raines's employer did not own or plan to purchase such an aircraft and did not reimburse Raines for the training. Raines deducted $11,028.53 from his 1978 income tax as an educational expense. The IRS disallowed the deductions and Raines appealed.

After reviewing the case, the Tax Court rejected the IRS's argument that the Flight Safety course did not maintain or improve the skills required by Raines's employment since the Falcon DA-20 is a markedly different type of plane from the KA-200 Beechcraft Turboprop owned by Raines's employer. The court found Raines established that the training in the Falcon - particularly in regard to the pressurization system, emergency procedures, crew coordination, and instrument instruction - improved the skills required in his employment. Thus, the costs associated with the course were deductible as educational expenses.

Boser v. Commissioner of Internal Revenue, 77 T. C. 1124

Boser was employed as a second officer on a DC-8 with United Airlines. To be hired as a second officer, UAL required Boser to have a commercial pilot certificate with an instrument rating. Having hired him, however, UAL did not require or provide the means to keep Boser's certificate or rating current. UAL required only that Boser keep current a flight engineer rating. Boser owned a Cessna 210 that he primarily used to commute between his home in Redding, California, and San Francisco International Airport, where he was based. He also used the plane to commute to property he owned in Northern California. In 1976, Boser claimed as educational expenses $3,359.68 in connection with his operation of his Cessna. The IRS denied the deductions on the basis that the operation of his Cessna did not maintain or improve the skills required for his employment.

In reviewing the case, the Tax Court noted that although neither UAL nor the FAA required flight engineers to maintain a current commercial pilot certificate with an instrument rating, the crew system used by UAL in flying DC-8s necessitated that flight engineers be familiar with the duties of the other crew members. The court also noted that a UAL flight instructor testified that flying light aircraft would improve the basic flying skills of all flying personnel, including second officers. The court held that Boser demonstrated a direct and proximate relationship between his piloting of the Cessna and his employment skills as a second officer.

Although the court found Boser's flying of the Cessna necessary, it did not find all of his claimed expenses reasonable. The court stated that expenses for commuting and other personal trips were nondeductible personal expenses. In determining to what extent Boser's expenses were reasonable and therefore deductible, the court held that Boser could deduct the costs associated with complying with the former FAA regulations requiring instrument pilots to have 6 hours of instrument time and 6 instrument approaches within a 6-month period.

Galbreath v. Commissioner of Internal Revenue, T.C. Memo 1982-540

Galbreath was employed as an air traffic control specialist. In 1976, he began taking flying lessons and received his private pilot certificate the following year. Galbreath then enrolled in a flying course entitled "Commercial." Upon completion of the course, he obtained his instrument rating. On his 1976 and 1977 tax returns, Galbreath deducted $1,192.10 for the private pilot course and $6,616.90 for the cost of the "Commercial" course. The IRS disallowed the deductions.

Galbreath petitioned the Tax Court to hear his case. He argued that he took the courses to improve his skills as an air traffic controller and, therefore, the costs of the flying lessons were deductible as educational expenses. Galbreath presented several examples of how his knowledge of flying aircraft enabled him to better perform his ATC duties and assist pilots. The court accepted Galbreath's argument and held that the costs associated with his private pilot's certificate were deductible. The court, however, disallowed the expenses associated with his instrument rating. Although the court acknowledged that the instrument rating alone did not qualify Galbreath for a new trade, it pointed out that the tax regulations deny deductions "for education which is part of a program of study which will lead to qualifying him in a new trade or business." The court stated that it was not necessary that every requirement for qualification in a new trade be met for the deduction to be disallowed. Since the instrument training was part of a course that included specific maneuvers required for commercial pilot certification, the court held that any costs associated with the "Commercial" course were nondeductible.

Brandt v. Commissioner of Internal Revenue, T.C. Memo 1982-180

Brandt was an Air Force C-5A pilot. In 1977 he took a 3-day flight engineer training course and subsequently received a flight engineer certificate. Brandt deducted $436.45 as an educational expense from his 1977 tax return. The IRS challenged the deduction on the basis that the education was part of a course of study that qualified him for a new trade or business.

The Tax Court agreed with the IRS. The court pointed out that a flight engineer's trade is entirely different from the pilot's trade; different training is required for the two positions, and different functions are served by the flight engineer and the pilot. The court noted that since the adoption of the 1976 tax regulations, it is no longer relevant whether the flight engineer training improved Brandt's skills as a pilot and whether this was his primary motivation for taking the training. The 1976 regulations removed the subjective test for determining the deductibility of educational expenses and provided for the application of an objective test.

The Tax Court stated: "Under this objective test, amounts expended for education, even though the education may help improve the skills of an individual in his present employment, are not deductible if the education is part of a program leading to qualifying an individual in a different trade or business."

Since the course qualified Brandt for the new trade of flight engineer, the expenses associated with the course were not deductible.

Korth v. Commission of Internal Revenue, T.C. Memo 1981-462

Korth worked as a copilot for Hughes Airwest, flying DC-9 and F-27 aircraft. He owned a motorized glider and an aerobatic plane. On his 1975 and 1976 tax returns, Korth deducted as educational expenses $2,433 and $5,862, respectively, for the costs of operating and maintaining these aircraft. Korth claimed the repetition of aerobatic maneuvers maintained and improved his skills as a commercial pilot. The IRS disagreed and disallowed the deductions.

Korth petitioned the Tax Court to review his case. In upholding the disallowance, the court stated that an educational expense must bear a direct and proximate relationship to an individual's business or trade before the expense is deductible. The court held that Korth "failed to establish a direct relationship between the unique and highly specialized skills required in flying commercial jet aircraft as sophisticated as the DC-9 and piloting a single-seat glider or aerobatic airplane."

Colangelo v. Commissioner Internal Revenue, T.C. Memo 1980-543

Colangelo was a Navy flight surgeon, aviation pathologist and aviation medical examiner. His duties included the analysis and prevention of aviation accidents. Although the Navy encouraged flight surgeons to fly, due to budget constraints the flight time available to flight surgeons was inadequate for them to remain proficient. Colangelo was a commercial pilot with an instrument rating and owned a Mooney. He was also a certified flight instructor but did not receive payment for lessons. During 1973, Colangelo logged approximately 490 hours. He deducted as educational expenses 50% of the costs of operating and maintaining the Mooney. The IRS disallowed the deduction.

Before the Tax Court, Colangelo argued that flying maintained and improved his skills required in his Navy employment. The IRS countered that the expenses were unnecessary and unreasonable and that the expenses were incurred to qualify Colangelo for a new trade or business, that of commercial pilot and instructor. The court rejected the latter argument because Colangelo held his commercial and instructor certificates prior to the 1973 tax year and, thus, his flying that year did not qualify him for a new trade. The court also found that the expenses were necessary to help Colangelo develop a needed rapport with pilots and provide him with insight into his accident prevention and analysis work. Finally, the court determined the expenses to be reasonable. Based upon expert testimony, the court concluded that it was reasonable for Colangelo to deduct the costs of up to 300 hours a year to maintain a level of proficiency consistent with safety.

Knudtson v. Commissioner of Internal Revenue, T.C. Memo 1980-455

Knudtson owned a business that rebuilt auto windshield wiper motors. To maintain a source of used wiper motors, Knudtson traveled to his suppliers, who were located throughout the United States, and to biannual conventions held by his suppliers. Knudtson owned an A-36 Beech Bonanza which he used in his business travels. In 1975, Knudtson began instrument training and earned his rating the following year. On his 1975 and 1976 tax returns, Knudston claimed deductions for aircraft operating expenses, depreciation, and the costs of instrument training. In a notice of deficiency, the IRS determined that only a portion of the expenses were for business purposes and disallowed the remaining deductions, including the instrument training, as personal expenses.

Knudtson petitioned the Tax Court to review his case and argued that the operation of the airplane for instrument flight training was deductible as an educational expense that maintained or improved skills required in his business. The court found that owning and operating the Bonanza was an ordinary and necessary expense of Knudtson's business in light of the geographic location of his suppliers. The court reasoned that knowledge of flying, therefore, was also a skill required by Knudston and that instrument training maintained and improved his skills. The court concluded that all hours flown for such training should be included in computing the business use of the plane.

Beckley v. U.S., 490 F. Supp. 123 (1980)

Beckley was a special agent for the FBI and held a private pilot certificate when he was hired. In the course of his employment, Beckley was called upon to fly on official business approximately 20 times from 1970-1974. He often canceled flights because of adverse weather conditions. Beckley decided to take instrument flight training and obtained his rating. He subsequently earned his commercial pilot and flight instructor certificates. Beckley deducted the costs of instrument flight training from his income tax return, and the IRS disallowed the deduction.

The Tax Court ruled in favor of Beckley and found that the ability to operate an aircraft in instrument conditions greatly enhanced his job performance. The court further stated: "The expense for the training required in obtaining an instrument rating should not be disallowed solely because an enthusiastic and ambitious agent later chose to further demonstrate his pilot's proficiency by easily obtaining additional certificates. Of course, plaintiffs are not entitled to a deduction for the subsequent expenses incurred in training, since a commercial pilot's license or flight instructor's license certainly qualifies him for a new trade."

Roussel v. Commissioner of Internal Revenue, T.C. Memo 1979-125

Roussel, a flight engineer, taught ground school safety to pilots at Flight Safety International. Roussel received very favorable critiques of his course except for the recurring complaint that he did not teach his subject from a pilot's perspective. After Flight Safety threatened to fire Roussel because of these complaints, he began to take flying lessons. Roussel eventually received his commercial pilot certificate, and the negative criticism about his teaching stopped. On his 1974 tax return, Roussel deducted $6,309 for the costs of his flying lessons. The IRS denied the deductions on the basis that the educational expenses qualified him for a new trade as a commercial pilot.

After reviewing the case, the Tax Court agreed with the IRS. The court acknowledged Roussel's argument that the flying lessons improved his teaching skills. The court, however, found that the commercial pilot certificate enabled him to earn compensation in a trade for which he was previously unqualified and, therefore, the costs of the training were not deductible. This was despite the fact that the court recognized that Roussel was an unlikely candidate for a career as a pilot, since he had few flying hours and did not hold an ATP certificate or an instrument rating.

Aaronson v. Commissioner of Internal Revenue, T.C. Memo 1970-178

Aaronson was employed as a full-time photographer for the New York Daily News. He also earned some income through free-lance work. In 1965 and 1966, Aaronson took flying lessons and subsequently obtained his private pilot certificate. Aaronson learned to fly in order to take aerial photographs of newsworthy events and to get to locales of such events quickly. The newspaper did not reimburse Aaronson for the costs of the lessons. Aaronson deducted these costs as educational expenses on his 1965 and 1966 income tax returns. The IRS disallowed the deductions.

Upon review of the case, the Tax Court found Aaronson was entitled to the deductions. The court rejected the IRS's argument that it was not customary for photographers to train as pilots and, thus, no connection existed between Aaronson's business and the flying expenses. The court recognized that learning to fly improved Aaronson's versatility as a news photographer, particularly with regard to his free-lance work, by allowing him to respond more quickly to news events and to capture from the air events which otherwise might be mundane or unattainable from the ground. The court stated that such qualities are the "touchstone" of a good news photographer. The court found support for its decision in the fact that the New York Daily News owned three airplanes and employed pilots for use by its staff. Finally, the court noted that the lessons did not qualify Aaronson for a new trade or business.

Shaw v. Commissioner of Internal Revenue, T.C. Memo 1969-120

Shaw was a physician and also served as a major in the Air Force Reserves in a non-flying status. Shaw had been a pilot in World War II. In 1960, he was appointed a medical examiner by the FAA. Shaw immediately resumed flying. In 1961 and part of 1962, Shaw rented aircraft; in June 1962, he purchased part ownership in a Mooney. On his 1961 and 1962 tax returns, Shaw deducted as educational expenses the costs of renting aircraft as well as the costs, including depreciation, associated with the Mooney. The IRS disallowed the deductions.

The Tax Court found Shaw had demonstrated that "because he maintained his flying skills he was better equipped to pass on the qualifications of an applicant for a pilot's license." Shaw also presented evidence that the FAA encouraged its medical examiners to fly. Since flying maintained and improved his employment skills, the court held the deductions to be ordinary and necessary. Although the court allowed the 1961 deductions as reasonable expenses, it found that Shaw failed to prove the amount of expenses deductible in 1962.